Are you planning to be financially independent as early as possible so you can live life on your own terms? Discuss successful investing strategies, asset allocation models, tax strategies and other related topics in our online forum community. Our members range from young folks just starting their journey to financial independence, military retirees and even multimillionaires. No matter where you fit in you'll find that Early-Retirement.org is a great community to join. Best of all it's totally FREE!

You are currently viewing our boards as a guest so you have limited access to our community. Please take the time to register and you will gain a lot of great new features including; the ability to participate in discussions, network with our members, see fewer ads, upload photographs, create a retirement blog, send private messages and so much, much more!

I own a few rental properties. So far very successfully. Although I studied the options and took a unique approach it has really worked well. I found that banks wanted .5% more and 25% down vs 20%. Might just be the bank I was dealing with, but they were the easiest to work with at the time. I have used the rentals for a couple different options. While I am working they provide some level of tax shelter although most paper losses are deferred as current income does not allow them. But that's OK as retirement income will and they will benefit me then. It provides two retirement options that I am still deciding which way to go. I can continue as now and just break even, get the tax advantages, and build the equity and at some point in the future sell them for the equity. Or I can accelerate the mortgage payoff and use the rental money as extra income.

I retire in 160 days or less (still working the final date) so I will decide which option when I see the retirement cash flow actually in place vs in a plan. Right now I believe I can live as planned and pay down those mortgages fairly fast, but need to get there to make sure it will work. If it does then I have both options in place. Monthly income and the ability to take a lump sum cash if needed.

I am actively buying townhouses as rental investments. I bought the first 5 with cash but with cash running low and investment options plentiful I'm now looking at financing as well. Just this week I put in an offer on a short sale townhouse that was accepted (still need bank approval). It's 100k and I'm getting a conventional 20% down loan at 5% with no points - so it's about 1% higher for an investor loan. I could certainly pay points and buy down the rate and might do that when it comes time to lock.

The nice thing about financing is that my ROI is actually better than the cash purchases since I'm using leverage. While I was getting 9-10% on the cash deals I'm projecting 16% on this one (assuming the bank approves it which is not a slam dunk).

I own three rental properties, all purchased within the past 4 years with downpayments of 25-32%. The rents are paying the mortgages and management fees. Currently I have approximately 55% equity overall. My goal is to pay off 1 or 2 of these mortgages prior to ER and use the surplus to pay down the third mortgage faster, generating an income stream. Unlike an annuity, I keep my equity and have the option of selling it in the future. I can also refinance and realize a lump sum which would not be subject to tax.

The nice thing about financing is that my ROI is actually better than the cash purchases since I'm using leverage. While I was getting 9-10% on the cash deals I'm projecting 16% on this one (assuming the bank approves it which is not a slam dunk).

I'm curious about the math on this statement. You mean that after subtracting the mortgage payment from the rent payment you'll be getting 16% return as opposed to 9% on the ones where you don't have a mortgage payment to subtract? That must be one hellacious rent payment, or an incredibly cheap house and mortgage.

__________________"Good judgment comes from experience. Experience comes from bad judgement." - Anonymous (not Will Rogers or Sam Clemens)DW and I - FIREd at 50 (7/06), living off assets

I'm curious about the math on this statement. You mean that after subtracting the mortgage payment from the rent payment you'll be getting 16% return as opposed to 9% on the ones where you don't have a mortgage payment to subtract? That must be one hellacious rent payment, or an incredibly cheap house and mortgage.

I'm curious about the math on this statement. You mean that after subtracting the mortgage payment from the rent payment you'll be getting 16% return as opposed to 9% on the ones where you don't have a mortgage payment to subtract? That must be one hellacious rent payment, or an incredibly cheap house and mortgage.

Absolutely using leverage gives you a greater ROI. Also exposes you to more risk if the underlying asset goes down in value.

Absolutely using leverage gives you a greater ROI. Also exposes you to more risk if the underlying asset goes down in value.

Not sure I agree totally with this statement. If the prices on both my townhouses go down $30k I still lose $30k either way. Yes, if I want to sell both I need to bring cash to the table on townhouse #2 but I'm out the same amount of money.

The more correct statement is that my ROI has much more variability in a leveraged deal - but that relates more to income and expenses.

What I mean is that if my market rent goes down from $1,300/month to $1,200/month my ROI on the all cash townhouse goes down by 1% but my ROI on the financed townhouse goes down by 4%. The impact of income and expenses in the financed deal are much more pronounced.

Latest Threads

Social Knowledge Community

About Us

This community was started in 2002 as an alternative to a then fee only Motley Fool. The focus of the discussions is on topics related to early retirement and financial independence. The community is moderated to ensure a pleasant experience for our members.